Stocks Waver Ahead of Close on Greece Fears

Abby Schultz and JeeYeon Park

Thursday, 2 Jun 2011 | 3:45 PM ETCNBC.com

SHARES

Stocks rebounded from earlier lows, but wavered ahead of the close Thursday ahead of the government's monthly jobs figure and after EU officials said no agreement has been reached on additional funding for Greece.

Moody’s warned that the U.S. rating could be placed under review for a possible downgradeif lawmakers in Washington do not make substantive progress in budget talks by the middle of July.

The dollar slipped against a basket of currencies while the euro touched a one-month high.

Meanwhile, Greece agreed with its EU and IMF lenders to impose yet deeper austerity, a senior official told Reuters, but a euro zone official later told CNBC there is no truth to the Reuters report. A Greek official declined comment.

The market tried to find its footing after a sharp selloff in the previous session triggered by news of unexpected weakness in the manufacturing sector and a smaller-than-expected gain in private payrolls, and compounded Moody's downgrade of Greece's debt deeper into junk status.

Further signs of weakness emerged as jobless claims fell less than expectedThursday, and retailers offered a mixed report on May same-store sales. But most investors were awaiting the May's jobs report on the government due Friday for a clearer picture of the economy's health.

"Leading into the unemployment data tomorrow, investors are very concerned the numbers are going to be worse than expected," said Jonathan Corpina, senior managing partner, Meridian Equity Partners. "I think the bar is set really, really low for tomorrow."

The government is expected to report that employers hired 150,000 last month, according to a Reuters survey, after increasing payrolls by 244,000 in April.

Volume was also light, which Corpina said will add to volatility for the rest of the session. Unless some news emerges that prompts investors to buy, "the people who didn't sell out yesterday will continue to sell out today," he said.

While investors have been jittery in the first two days of June, the weakness evident in the latest series of economic reports is consistent with a choppy recovery, said Nicholas Colas, chief market strategist at BNY ConvergEx Group. The choppiness shouldn't be a surprise, and it doesn't mean the economy won't turn around later this year, Colas added.

"We’re going to get periods of slowdown but it doesn’t mean we roll over and die," he said.

Retailers were mostly lower after posting a mixed bag of monthly salesfigures as consumers struggled with higher prices for gasoline.

Costco's same-store sales in May beat estimates thanks to higher gas prices, rising 13 percent, while BJ's Wholesale also did better than expected. But Limited Brands, owner of Victoria's Secret, Gap, Target and TJX all missed.

Financials stocks were largely higher despite a spate of bad news. Goldman Sachs was off the lows of the session that were reached after news the investment firm received a subpoena from New York State.

And Moody's placed Bank of America , Citigroup and Wells Fargoon review for possible downgrade. The banks had benefited from monetary stimulus during the financial crisis and the review will show whether the removal of that support will require an adjustment.

Chinese hackers were suspected of trying to steal passwordsfrom hundreds of Google email accounts, including senior U.S. government officials, Chinese activists and journalists, the Internet company said. China's Foreign Ministry denied the accusations.

For-profit education stocks such as DeVry and Apollo Group spiked to the top of the S&P 500 index after U.S. officials softened rules that could have cut off tuition aid to the schools.

On the IPO front, Groupon announced it will go public, filing for a $750 million IPO. The deal-of-the-day site said it earned $645 million in revenue for the first quarter of 2011. The firm is expected to trade under the ticker symbol "GRPN."

On the economic front, initial claims for unemploymentfell less than expected, the Labor Department reported. Meanwhile, nonfarm productivity grew slightly more than previously estimated, while labor costs increased slightly less than expected.

And factory orders slipped in April, the biggest decline in almost a year, the Commerce Department reported.

European shares fell to a one-week closing low amid concerns about the pace of the global recovery. Meanwhile, ECB President Jean-Claude Trichet Thursday said there should be a euro-zone finance ministryto oversee euro zone fiscal policy.